Paying the deductible year after year

New Evidence on the Persistence of Health Spending

By Richard A. Hirth, Teresa B. Gibson, Helen G. Levy, Jeffrey A. Smith, Sebastian Calónico, Anup Das
Medical Care Research and Review, June 2015


Surprisingly little is known about long-term spending patterns in the under-65 population. Such information could inform efforts to improve coverage and control costs. Using the MarketScan claims database, we characterize the persistence of health care spending in the privately insured, under-65 population. Over a 6-year period, 69.8% of enrollees never had annual spending in the top 10% of the distribution and the bottom 50% of spenders accounted for less than 10% of spending. Those in the top 10% in 2003 were almost as likely (34.4%) to be in the top 10% five years later as one year later (43.4%). Many comorbid conditions retained much of their predictive power even 5 years later. The persistence at both ends of the spending distribution indicates the potential for adverse selection and cream skimming and supports the use of disease management, particularly for those with the conditions that remained strong predictors of high spending throughout the follow-up period.


High health spending is more persistent than you might think

By Austin B. Frakt, PhD
AcademyHealth Blog, July 9, 2015

You get hit with a major health condition and your health care needs and spending spikes. A lot. Welcome to the 10% club, whose members spend at least $30,000 on health care in a year. Yeah, most of it is covered by insurance, but selecting the plan with the $2,500 deductible you blew through (not to mention the thousands more in copayments) looks like a bad idea in hindsight.

It could be worse. It could happen to you next year, and the year after, and the year after that, and so on. Will it?

This is a question of health spending persistence. And, as surprising as it may sound, we don’t know a lot about it, at least for the working age population.

Richard Hirth and colleagues recently were able to take an analysis of persistence for workers and their dependents a lot further, and using recent data. They looked at six years of health spending data (2003-2008) for a sample of millions of individuals with coverage from over 100 medium and large employers. One of their findings is that at least one in every three high spenders in a given year will be a high spender in any of the next five years. (Here, high spender is defined as in the top 10% of the annual spending distribution.) I don’t know what your prior is, but this is a much higher level of persistence than I expected.

If you’re unlucky enough to get hit with a very costly health condition, consider yourself relatively lucky if it’s not highly persistent. The new work by Hirth and colleagues shows that such persistence is surprisingly common and remarkably long. This is how sickness saps savings, for those with coverage that comes with high enough deductibles and copayments. Today, we call that “insurance.” Is it?



By Don McCanne, M.D.

We already know that high deductibles and other cost sharing can result in financial hardships for individuals who develop major medical problems. But how many face the additional burden of having to pay the high deductibles in the years following? This study provides an answer.

Of health plan members or their family members who were in the top 10 percent of spending in a given year, 43 percent were still in the top 10 percent the following year, and an astonishing 34 percent were still in the top 10 percent five years later.

These are workers and their family members - largely middle-income Americans - who had employer-sponsored health plans. These are the plans that the Affordable Care Act was designed to protect. Now that employers are are switching to “consumer-directed” high-deductible health plans, these plans are devastating to the personal finances of these families that must meet the high-deductibles and other cost sharing year after year. Forget retirement funds, college funds, vacations, and the like and plan to spend time with bill collectors and bankruptcy referees.

When you think about the financial protection that you should be receiving from your health plan, it is deplorable that one-third of those who have the greatest needs for health care are exposed to years of recurrent, persisting financial burdens simply because of the fundamentally flawed design of our private health plans. Austin Frakt is right to question if this is even "insurance."

The authors of the study suggest that the solution is found in disease management. What? Disease management only tweaks spending on major medical problems and would have no impact on the high-deductibles that patients would have to pay before their coverage kicks in. Let’s get real.

A single payer system with first dollar coverage would eliminate the burden of high medical bills that these unfortunate individuals face under our current, dysfunctional health care financing system. Yes, they need qualified health professionals to help them manage their diseases, but that’s a function of the health care delivery system. Intrusive, private, third-party money managers need to get out of the way.